Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/124

 § 13^.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. Power to increase or decrease the capital stock. poration has no power to increase or diminish its stock, unless expressly authorized so to do ; x nor has it the power to increase or decrease the number of shares into which the capital stock is divided. 2 And when power is given to increase or decrease the capital stock or the number of shares into which it is divided, the mode of pro- ceeding indicated by the statute or articles of association must be substantially adhered to. 3 § 134. In regard to the power of a corporation to purchase shares of its own stock, there is a difference of opin- ion. The English decisions seem unanimously to negative the possession of this power by corpora- tions ; and Mr. Brice's proposition — " Corporations cannot, whatever the nature of their business, with- out an express and very clear power in that behalf, deal in their own shares " — may be regarded as expressing, though somewhat vaguely, from his use of the word " deal." the English law on this subject. 4 Power of a corpora- tion to pur- chase shares of its own stock. i New York and N. H. R. R. Co. v. Schuyler, 34 N. Y. 30; Sutherland ». Olcott, 95 N. Y. 93; Einstein v. R. G. & E. Co., 146 N. Y. 46; Grangers,' etc., Ins. Co. v. Kamper, 73 Ala. 325; Smith v. Goldsworthy, 4 Q. B. 430; see Railway Co. v. Allerton, 18 Wall. 233, 235; Droitwitch Patent Salt Co. v. Curson, L. R. 3 Ex. 35; Cooke v. Marshall, 191 Pa. St. 315; and com- pare In re Financial Corporation, Holmes's Case, L. R. 2 Ch. 714. 2 Oldtown R. R. Co. v. Veazie, 39 Me. 571; Salem Mill Dam Co. v. Ropes, 6 Pick. 23, 32. 3 Spring Co. v. Knowlton, 103 U. S. 49; Knowlton v. Congress Spring Co., 57 N. Y. 518. See State v. McGrath, 86 Mo. 239, and compare Columbia N. Bk.'s App., 16 Weekly Notes of Cases (Pa.), 357; and cases cited in the two preceding notes. Share- holders may waive formalities in- tended for their protection. Nelson v. Hubbard, 96 Ala. 238. However, a corporation having 104 earned a dividend, and possessing the power to increase its capital stock, may declare a stock dividend. How- ell v. Chicago and N. W. R'y Co., 51 Barb. 378. AVhen an increase of stock is contemplated by the articles of association, and made in the exer- cise of a power given by statute, and in the manner prescribed by statute, if the new stock is properly disposed of, so that in the disposition plain- tiff's rights are observed, the motives leading the majority of shareholders (and directors) to vote for it are im- material. Jones v. Morrison, 31 Minn. 140. See, also, § 568. 4 "Ultra Vires," 2d Am. ed. 94; Zulueta's Claim, L. R. 5 Ch. 444; In re Marseilles Extension R'y Co., ex parte Credit Foncier of England, L. R. 7 Ch. 161; see Evans v. Coventry, 25 L. J. Ch. 489; Hall's Case, L. R. 5 Ch. 707. Compare Hope v. Interna- tional Financial Soc'y, L. R. 4 Ch. D. 327; Teasd ale's Case, L. R. 9 Ch. 54. Even though the corporation has